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Human Resources > Retirement Investors' Club (RIC) > State of Iowa Employees > Program Basics > Tax Benefits

Tax Benefits

piggy bank with uncle Sam hatThe tax benefits of participating in the RIC 457 plan differ depending on whether you elect for your deductions to be taken from your paycheck before or after taxes. Employer matching contributions deposited to the 401a plan are made pretax.

Saver's Tax Credit: You may be eligible for up to a $1,000 tax credit read more..

  Pretax   Post-tax Roth
Contributions Made before state and federal tax withholding   Made after state and federal tax withholding; See Roth 457 Summary for more information.
Immediate benefit Lower taxable income for the year   None
Earnings
(if any)		 Grow tax-deferred   Grow tax-free
Distributions Taxable as ordinary income   Tax-free if qualified

Qualified Roth Distribution

Earnings on after-tax Roth contributions are tax-free if the participant meets all 3 of these requirements:

  1. A distributable event has occurred
  2. Roth account is held 5+ years (from first 457 Roth contribution), and
  3. The participant is age 59½ or older, disabled, or deceased.

If one or more of these requirements are not met, it is considered a non-qualified Roth distribution and subject to taxation on the earnings portion of the distributed amount.

Roth contributions are invested after taxes are withheld so distributions of Roth contributions are tax-free.

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State of Iowa Employees

 
 
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